Firms pay 38 times more for overseas phone links in UAE

Businesses looking for secure international phone connections between the UAE and overseas offices are charged up to 38 times more than they would be in European and North American business centres, a report says. It blames a lack of competition and passive regulation for the price difference, but an analyst with the company that released the report also cited the pricing strategy of UAE operators.

Companies often rent a dedicated phone line between two locations to guarantee a fast, secure link, but are now turning to internet-based virtual private networks (VPNs). A typical VPN connection in New York would cost an average of US$377 (Dh1,384) a month, data collated by TeleGeography, a research group, show, while a similar connection from Dubai would cost more than $14,000. "Probably 95 per cent of the price of getting from Dubai to London comes from getting from Dubai to the cable landing station," said Gregory Bryan, an analyst at Tele-Geography.

"The other 5 per cent comes from the cost of the international cable, and that will go down as new capacity comes online. But without a change in the pricing strategy by the UAE operators, you probably won't see major changes." The report said a lack of competition was a major factor. "The high cost of VPN service in Dubai is a reflection of the other key driver of costs: local competition," TeleGeography said.

"The local telecom market in the UAE is uncompetitive and, despite adequate submarine cable supply, enterprise providers must pay high local access charges to connect customers in Dubai to their network." TeleGeography's report came a day after the national telecommunications regulator released a policy on internet-based telecoms services, which reiterated the ban on companies looking to compete with the UAE's two operators in the market for international calls.

Services such as Skype, which have reshaped the international telecoms market, remain illegal under the new policy. Calls to India with Etisalat cost Dh2.69 a minute - about 30 times the Dh0.08 charged by Skype. Etisalat's rival du, which has focused on price competition, charges Dh1.80 a minute. The UAE telecoms market is closed to foreign competition and Etisalat has used much of its profits to expand into more liberalised markets overseas.

When World Trade Organisation member countries agreed to fully liberalise their telecoms markets by next year, the country obtained a special extension to the deadline, giving it until 2015 to comply. The cost of international calling and VPN systems is also determined by the availability of international connections, typically provided by undersea cables. Only a handful of cables connect the region to the outside world, contributing to price differences and periodic internet cuts when cables are damaged. Two such events have caused widespread internet failures across the Middle East since the start of 2008.

A number of new cables are being rolled out, connecting the Gulf to Africa, Asia and Europe. John McLean, a spokesman for the Gulf Bridge project that is building a submarine cable system throughout the GCC, said new capacity should reduce prices. "The Gulf right now is capacity hungry and we're seeing a rapid growth in demand from across the board, from individual consumers but also from the bigger clients, as governments are building financial hubs or media cities and really stimulating demand," Mr McLean said.

"Clearly, as supply comes on tap, the competitive environment will change." @Email:tgara@thenational.ae